CANONSBURG, Pa., Aug. 6, 2019 /PRNewswire/ -- CONSOL Coal
Resources LP (NYSE: CCR) today reported financial and operating
results for the quarter ended June 30, 2019.
Second Quarter 2019 Results Include:
- Cash distribution of $0.5125
per unit;
- Net income of $14.4
million;
- Adjusted EBITDA1 of $27.6
million;
- Distribution coverage ratio1 of 1.2x;
- Net leverage ratio1 of 1.6x; and
- Increased 2020 contracted coal sales volume to 80%.
Management Comments
"While commodity markets have been under pressure since the
beginning of 2019, I am pleased to announce that the CCR team
continues to deliver strong operating and financial performance,"
said Jimmy Brock, Chief Executive
Officer of CONSOL Coal Resources GP LLC, the general partner of the
Partnership. "Our results for the first half of 2019 demonstrate
the effectiveness of our strategy, which is based on a stable
customer base, consistent operations and financial sustainability.
For the second quarter, on the marketing front, even while PJM West
power prices and prompt export thermal coal prices declined more
than 25% compared to the year-ago period, we were less affected due
to our contracted portfolio position and solid customer base. On
the operational front, we had another robust production quarter
providing consistent shipments to our customers. On the financial
front, we generated a distribution coverage ratio of 1.2x and
continued to provide an attractive distribution yield to our
unitholders."
"On the safety front, the Pennsylvania Mining Complex (PAMC)
employees improved their safety performance, as measured by number
of incidents, by 30% compared to the same period in 2018. The
central preparation plant continued its strong safety performance
with an incident-free quarter."
Sales & Marketing
Our marketing team shipped 1.8 million tons of coal during the
second quarter of 2019 at an average revenue per ton of
$47.53, compared to 2.0 million tons
at an average revenue per ton of $47.34 in the year-ago period. Despite the
ongoing headwinds across the coal space due to softening export
fundamentals, low natural gas prices, and a decline in
weather-driven demand, demand for our coal remained robust. Average
revenue per ton benefited from an increase in prices that we
receive for our export coal. This was partially offset by a decline
in average revenue per ton on our power price-linked netback
contracts as around-the-clock PJM West power prices averaged
approximately 27% lower compared to the year-ago period. This
stability in our average revenue per ton compared to the year-ago
period, despite declining PJM West power prices, lower spot prices
for export coal and lower domestic natural gas prices, is a
testament to our differentiated contracting strategy, strong
customer base and world-class assets.
During the quarter, we were successful in securing additional
contracts for 2020 and 2021 coal sales bringing our contracted
positions to 80% and 34%, respectively, assuming a 6.75 million ton
annual run rate. During the second quarter, one of our longwalls
also transitioned to a lower sulfur region of the mine plan at
PAMC. We believe this will provide us with additional quality
improvements that should help to increase the domestic and export
marketability of the PAMC product, including access to newer
markets.
According to the U.S. Energy Information Administration,
inventories at domestic utilities stood at approximately 115
million tons at the end of May, down by more than 10% from year-ago
levels. While low natural gas and power prices weighed on broader
coal demand, we continued to ship all we could produce during the
second quarter, highlighting the quality and resilience of our
customer base. Looking forward, as mines and railroads return from
their annual maintenance shutdown period, we expect demand for our
domestic contracted tonnage to remain steady. With summer weather
now upon most of the nation and the National Oceanic and
Atmospheric Administration predicting warmer-than-normal conditions
through the fall across the coasts, we expect that cooling demand
will help support electricity demand, which will continue to keep
coal stockpiles at relatively low levels.
On the export front, API2 spot prices for export thermal coal
declined by approximately 44% during the first six months of 2019.
Our revenues were largely unaffected due to our previously
disclosed export contract, which runs through December 2020 and has fixed volumes with collared
prices, that nets us a floor price per ton above $45.52. While spot export prices remain
depressed, we continue to see strong demand from Asia. As mentioned in our previous release,
approximately 111 GW of new coal-fired capacity is under
construction globally for commissioning between 2019-2024.
Furthermore, an additional 300 GW of new coal-fired capacity is in
the planning stages. We believe this bodes well for sea-borne
thermal coal demand, particularly for high-Btu NAPP coal, and we
will remain opportunistic in our contracting strategy to maintain a
stable earnings profile at PAMC for our shareholders.
Operations Summary
CCR achieved a second quarter production of 1.8 million tons,
which compares to 1.9 million tons in the second quarter of 2018.
The decline in coal production was due to the impact of an
additional longwall move in 2Q19 and slower start-up of the
longwall after the move. At our Harvey mine, we set a new quarterly
production record of 384 thousand tons.
Total costs during the second quarter were $75.3 million compared to $78.7 million in the year-ago quarter. Average
cash cost of coal sold per ton1 was $31.07 compared to $26.99 in the year-ago quarter. The impairment to
cost per ton was largely driven by lower fixed cost leverage,
higher mine maintenance cost and project expense. Since the fourth
quarter of 2017, we have seen inflation in the cost of supplies
that contain steel and other commodities. However, with steel
prices declining, we expect to see some relief as some of our
supply contracts reset. We have been successful in managing these
cost pressures and keeping our overall cost increases within our
annual guidance range.
|
|
Three Months
Ended
|
|
|
June 30,
2019
|
|
June 30,
2018
|
Coal
Production
|
million
tons
|
1.8
|
|
1.9
|
Coal Sales
|
million
tons
|
1.8
|
|
2.0
|
Average Revenue Per
Ton
|
per ton
|
$47.53
|
|
$47.34
|
Average Cash Cost of
Coal Sold1
|
per ton
|
$31.07
|
|
$26.99
|
Average Cash Margin
Per Ton Sold1
|
per ton
|
$16.46
|
|
$20.35
|
|
|
|
|
|
|
|
Quarterly Distribution and End of Subordination
Period
During the second quarter of 2019, CCR generated net cash
provided by operating activities of $21.9 million and
distributable cash flow1 of $16.8 million,
yielding a distribution coverage ratio1 of 1.2x. During
the quarter, our net cash provided by operating activities was
impacted by lower net income and an increase in working capital.
Our distribution coverage ratio calculation is based on estimated
maintenance capital expenditures of $9.0
million, while our actual cash maintenance capital
expenditures for the second quarter were $10.0 million. Based
on our current outlook for the coal markets and a year-to-date
distribution coverage ratio1 of 1.2x, the board of
directors of the general partner has elected to pay a cash
distribution of $0.5125 per unit
to all limited partner unitholders and the holder of the general
partner interest. As previously announced on July 25, 2019, the distribution to all
unitholders of the Partnership will be made on August 15,
2019, to such holders of record at the close of business on
August 8, 2019. We also announced
that upon payment of the second-quarter distribution, the financial
tests required for conversion of all of the CCR subordinated units,
which are owned by CONSOL Energy, Inc., will have been met.
Accordingly, the subordinated units will convert into common units
on a one-for-one basis effective August 16,
2019, the first business day following the payment of the
second-quarter distribution.
2019 Guidance and Outlook
Based on our year-to-date results, current contracted position,
estimated prices and production plans, please find below our
financial and operating performance guidance for 2019.
- Coal sales volumes - 6.70-6.95 million tons
- Average revenue per ton - $47-$48
- Average cash cost of coal sold per ton2 -
$30.40-$31.40
- Adjusted EBITDA2 - $95-$103
million
- Capital expenditures - $34-$38
million
Second Quarter Earnings Conference Call
A joint conference call and webcast with CONSOL Energy Inc.,
during which management will discuss the second quarter 2019
financial and operational results, is scheduled for August 6,
2019 at 11:00 AM ET. Prepared remarks by members of
management will be followed by a question and answer session.
Interested parties may listen via webcast on the Events page of our
website, www.ccrlp.com. An archive of the webcast will be
available for 30 days after the event.
Participant dial in (toll free) 1-888-348-6419
Participant international dial in 1-412-902-4235
Availability of Additional Information
Please refer to our website www.ccrlp.com for additional
information regarding this company. Prior to the earnings
conference call, we will make available additional information in a
presentation slide deck to provide investors with further insights
into our financial and operating performance. This material can be
accessed through the "Events and Presentations" page of our
website, www.ccrlp.com. In addition, we may provide other
information about the company from time to time on our website.
We will also file our Form 10-Q with the Securities and Exchange
Commission (SEC), reporting our results for the quarter and six
months ended June 30, 2019. Investors
seeking our detailed financial statements can refer to the Form
10-Q once it has been filed with the SEC.
Footnotes:
1 "adjusted EBITDA", "distribution coverage
ratio", "distributable cash flow", "average cash cost of coal sold
per ton", "average cash margin per ton sold" and "net leverage
ratio" are non-GAAP financial measures, which are reconciled to the
most directly comparable GAAP financial measures immediately below
the caption "Reconciliation of Non-GAAP Financial Measures".
2 CCR is unable to provide a reconciliation of
adjusted EBITDA guidance to net income or average cash cost of coal
sold per ton guidance to total costs, the most comparable financial
measures calculated in accordance with GAAP, due to the unknown
effect, timing and potential significance of certain income
statement items.
About CONSOL Coal Resources LP
CONSOL Coal Resources LP (NYSE:CCR) is a master limited
partnership formed in 2015 to manage and further develop all of
CONSOL Energy Inc.'s (NYSE:CEIX) active coal operations in
Pennsylvania. CCR's assets include
a 25% undivided interest in, and operational control over, the
Pennsylvania Mining Complex, which consists of three underground
mines - Bailey, Enlow Fork and Harvey - and related infrastructure.
For its ownership interest, CCR has an effective annual production
capacity of 7.1 million tons of high-Btu North Appalachian thermal
and crossover metallurgical coal. More information is available on
our website www.ccrlp.com.
Contacts:
Investor:
Mitesh Thakkar, (724) 416-8335
miteshthakkar@consolenergy.com
Media:
Zach Smith, (724) 416-8291
zacherysmith@consolenergy.com
Reconciliation of Non-GAAP Financial Measures
We evaluate our cost of coal sold and cash cost of coal sold on
a cost per ton basis. Our cost of coal sold per ton represents our
costs of coal sold divided by the tons of coal we sell. We define
cost of coal sold as operating and other production costs related
to produced tons sold, along with changes in coal inventory, both
in volumes and carrying values. The cost of coal sold per ton
includes items such as direct operating costs, royalty and
production taxes, direct administration, and depreciation,
depletion and amortization costs on production assets. Our costs
exclude any indirect costs such as selling, general and
administrative costs, freight expenses, interest expenses,
depreciation, depletion and amortization costs on non-production
assets and other costs not directly attributable to the production
of coal. The GAAP measure most directly comparable to cost of coal
sold is total costs. The cash cost of coal sold includes cost of
coal sold less depreciation, depletion and amortization cost on
production assets. The GAAP measure most directly comparable to
cash cost of coal sold is total costs.
The following table presents a reconciliation of cost of coal
sold and cash cost of coal sold to total costs, the most directly
comparable GAAP financial measure, on a historical basis for each
of the periods indicated (in thousands).
|
Three Months Ended
June 30,
|
|
2019
|
|
2018
|
Total
Costs
|
$
|
75,260
|
|
|
$
|
78,681
|
|
Freight
Expense
|
(964)
|
|
|
(4,361)
|
|
Selling, General and
Administrative Expenses
|
(2,953)
|
|
|
(3,341)
|
|
Interest Expense,
Net
|
(1,557)
|
|
|
(1,784)
|
|
Other Costs
(Non-Production)
|
(907)
|
|
|
(4,239)
|
|
Depreciation,
Depletion and Amortization (Non-Production)
|
(509)
|
|
|
(543)
|
|
Cost of Coal
Sold
|
$
|
68,370
|
|
|
$
|
64,413
|
|
Depreciation,
Depletion and Amortization (Production)
|
(10,827)
|
|
|
(11,353)
|
|
Cash Cost of Coal
Sold
|
$
|
57,543
|
|
|
$
|
53,060
|
|
We define average cash margin per ton as average coal
revenue per ton, net of average cash cost of coal per ton sold. The
GAAP measure most directly comparable to average cash margin per
ton is total coal revenue.
The following table presents a reconciliation of average cash
margin per ton sold to coal revenue, the most directly comparable
GAAP financial measure, on a historical basis, for each of the
periods indicated (in thousands, except per ton information).
|
Three Months Ended
June 30,
|
|
2019
|
|
2018
|
Total Coal
Revenue
|
$
|
87,655
|
|
|
$
|
92,674
|
|
Operating and Other
Costs
|
58,450
|
|
|
57,299
|
|
Less: Other Costs
(Non-Production)
|
(907)
|
|
|
(4,239)
|
|
Cash Cost of Coal
Sold
|
57,543
|
|
|
53,060
|
|
Add: Depreciation,
Depletion and Amortization
|
11,336
|
|
|
11,896
|
|
Less: Depreciation,
Depletion and Amortization (Non-Production)
|
(509)
|
|
|
(543)
|
|
Cost of Coal
Sold
|
$
|
68,370
|
|
|
$
|
64,413
|
|
Total Tons
Sold
|
1,844
|
|
|
1,958
|
|
Average Revenue Per
Ton Sold
|
$
|
47.53
|
|
|
$
|
47.34
|
|
Average Cash Cost Per
Ton Sold
|
31.07
|
|
|
26.99
|
|
Add: Depreciation,
Depletion and Amortization Costs Per Ton Sold
|
6.00
|
|
|
5.91
|
|
Average Cost Per Ton
Sold
|
37.07
|
|
|
32.90
|
|
Average Margin Per
Ton Sold
|
10.46
|
|
|
14.44
|
|
Add: Total
Depreciation, Depletion and Amortization Costs Per Ton
Sold
|
6.00
|
|
|
5.91
|
|
Average Cash
Margin Per Ton Sold
|
$
|
16.46
|
|
|
$
|
20.35
|
|
We define adjusted EBITDA as (i) net income (loss) before net
interest expense, depreciation, depletion and amortization, as
adjusted for (ii) certain non-cash items, such as long-term
incentive awards including phantom units under the CONSOL Coal
Resources LP 2015 Long-Term Incentive Plan ("unit-based
compensation"). The GAAP measure most directly comparable to
adjusted EBITDA is net income.
We define distributable cash flow as (i) net income (loss)
before net interest expense, depreciation, depletion and
amortization, as adjusted for (ii) certain non-cash items, such as
unit-based compensation, less net cash interest paid and estimated
maintenance capital expenditures, which is defined as those
forecasted average capital expenditures required to maintain, over
the long-term, the operating capacity of our capital assets. These
estimated capital expenditures do not reflect the actual cash
capital expenditures incurred in the period presented.
Distributable cash flow will not reflect changes in working capital
balances. The GAAP measures most directly comparable to
distributable cash flow are net income and net cash provided by
operating activities. We define distribution coverage ratio as a
ratio of the distributable cash flow to the distributions, which is
the $0.5125 per quarter distribution
for all limited partner units, including common and subordinated
units, issued for the periods presented.
The following table presents a reconciliation of adjusted EBITDA
to net income, the most directly comparable GAAP financial measure,
on a historical basis for each of the periods indicated. The
table also presents a reconciliation of distributable cash flow to
net income and operating cash flows, the most directly comparable
GAAP financial measures, on a historical basis for each of the
periods indicated (in thousands).
|
Three Months Ended
June 30,
|
|
2019
|
|
2018
|
Net
Income
|
$
|
14,387
|
|
|
$
|
19,376
|
|
Plus:
|
|
|
|
Interest
Expense
|
1,557
|
|
|
1,784
|
|
Depreciation,
Depletion and Amortization
|
11,336
|
|
|
11,896
|
|
Unit-Based
Compensation
|
341
|
|
|
508
|
|
Adjusted
EBITDA
|
$
|
27,621
|
|
|
$
|
33,564
|
|
Less:
|
|
|
|
Cash
Interest
|
1,815
|
|
|
2,130
|
|
Estimated Maintenance
Capital Expenditures
|
9,028
|
|
|
9,085
|
|
Distributable Cash
Flow
|
$
|
16,778
|
|
|
$
|
22,349
|
|
|
|
|
|
Net Cash Provided
by Operating Activities
|
$
|
21,860
|
|
|
$
|
48,949
|
|
Plus:
|
|
|
|
Interest
Expense
|
1,557
|
|
|
1,784
|
|
Other, Including
Working Capital
|
4,204
|
|
|
(17,169)
|
|
Adjusted
EBITDA
|
$
|
27,621
|
|
|
$
|
33,564
|
|
Less:
|
|
|
|
Cash
Interest
|
1,815
|
|
|
2,130
|
|
Estimated Maintenance
Capital Expenditures
|
9,028
|
|
|
9,085
|
|
Distributable Cash
Flow
|
$
|
16,778
|
|
|
$
|
22,349
|
|
Distributions
|
$
|
14,404
|
|
|
$
|
14,348
|
|
Distribution
Coverage
|
1.2
|
|
|
1.6
|
|
We define net leverage ratio as the ratio of net debt to last
twelve month (LTM) earnings before interest expense, depreciation,
depletion and amortization, adjusted for certain non-cash items,
such as long-term incentive awards, amortization of debt issuance
and capitalized interest.
The following table presents a reconciliation of the net
leverage ratio to net income, the most directly comparable GAAP
financial measure on a historical basis for the period indicated
(in thousands).
|
Twelve Months
Ended
|
|
June 30,
2019
|
Net
Income
|
$
|
54,840
|
|
Plus:
|
|
Interest Expense,
Net
|
5,840
|
|
Depreciation,
Depletion and Amortization
|
44,585
|
|
Unit-Based
Compensation
|
1,713
|
|
Non-Cash Expense, Net
of Cash Payments for Legacy Employee Liabilities
|
1,385
|
|
Other Adjustments to
Net Income
|
1,984
|
|
EBITDA Per Affiliated
Company Credit Agreement
|
$
|
110,347
|
|
|
|
Borrowings under
Affiliated Company Credit Agreement
|
$
|
165,000
|
|
Finance
Leases
|
6,691
|
|
Total Debt
|
171,691
|
|
Less:
|
|
Cash on
Hand
|
460
|
|
Net Debt Per
Affiliated Company Credit Agreement
|
$
|
171,231
|
|
|
|
Net Leverage Ratio
(Net Debt/EBITDA)
|
1.6
|
|
Cautionary Statement Regarding Forward-Looking
Statements
Certain statements in this press release are "forward-looking
statements" within the meaning of the federal securities laws. With
the exception of historical matters, the matters discussed in this
press release are forward-looking statements (as defined in Section
21E of the Securities Exchange Act of 1934, as amended) that
involve risks and uncertainties that could cause actual results to
differ materially from projected results. Accordingly, investors
should not place undue reliance on forward-looking statements as a
prediction of actual results. The forward-looking statements may
include projections and estimates concerning the timing and success
of specific projects and our future production, revenues, income
and capital spending. When we use the words "anticipate,"
"believe," "could," "continue," "estimate," "expect," "intend,"
"may," "plan," "predict," "project," "should," "will," or their
negatives, or other similar expressions, the statements which
include those words are usually forward-looking statements. When we
describe strategy that involves risks or uncertainties, we are
making forward-looking statements. We have based these
forward-looking statements on our current expectations and
assumptions about future events. While our management considers
these expectations and assumptions to be reasonable, they are
inherently subject to significant business, economic, competitive,
regulatory and other risks, contingencies and uncertainties, most
of which are difficult to predict and many of which are beyond our
control. Specific risks, contingencies and uncertainties are
discussed in more detail in our filings with the Securities and
Exchange Commission. The forward-looking statements in this press
release speak only as of the date of this press release and CCR
disclaims any intention or obligation to update publicly any
forward-looking statements, whether in response to new information,
future events, or otherwise, except as required by applicable
law.
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SOURCE CONSOL Coal Resources LP